Record quarter, softer year for Lihir

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Lihir Gold reported record September quarterly production but
lowered its annual forecast by 100,000 ounces due to a deadly
landslide at its Papua New Guinean mine that occurred after the
quarter ended.

In a report released yesterday, the goldminer said it expected
to produce 600,000 ounces this year - the same level as last year -
rather than its original goal of 700,000 ounces.

Production at its Lihir Island mine was suspended after a
landslide cut its water supply and killed two miners on October 9,
but is now running at about 30 per cent of capacity.

A replacement water pipeline is being installed and full
production is expected to resume next week.

At spot gold prices, the deferral of 100,000 ounces of
production to the next financial year would cost the company about
$US47 million ($63 million) in sales.

Lihir produced a record 193,000 ounces of gold in the September
quarter, beating its guidance of 190,000 ounces, on much lower
costs.

Production costs fell to $US272 an ounce from $US462 in the June
quarter as the company mined higher grade ore. The average ore
grade rose to 7.15 grams per tonne compared to 4.41 grams per tonne
in the June quarter.

"The criticism of this company has always been the high costs
and lack of cash flow and with the higher grade, they are starting
to address this," RBC Capital Markets analyst Geoff Breen said. "I
thought overall it was a pretty pleasing quarterly."

Lihir also managed to cut its power costs when its 30 megawatt
geothermal power station was completed in July. An additional 20MW
expansion is scheduled to be completed by the third quarter of next
year.

Lihir's newly appointed managing director, Arthur Hood, told the
Herald his main focus was getting the mine to perform to its
"full potential".

The company has forecast production of 700,000 ounces in 2006,
rising to 890,000 ounces in 2007.

"There's lot of opportunity to grow on the island," Mr Hood
said. But acquisitions would be considered if they could increase
shareholder value, he said.

His predecessor, Neil Swan, was based on Lihir Island but Mr
Hood is based in Brisbane in a bid to help grow the $2.2 billion
company.